66,000 new home sales in June, down from 68,000 sales in May
Mortgage applications for new home purchases in June decreased 3% from May and 23.8% year over year, suggesting a slowdown in the housing market, according to a recent report from the Mortgage Bankers Association.
New single-family home sales were reported at a seasonally adjusted annual rate of 704,000 units in June, a decrease of 5% from May’s pace of 741,000. The MBA estimates there were 66,000 new home sales in June, down from 68,000 such sales in May.
Overall sales of new homes are still down 7% from last year, according to Joel Kan, MBA associate vice president of economic and industry forecasting.
“Last year was the strongest year in the housing market for new home sales in over a decade,” he said. “Right now, homebuilders are encountering stronger headwinds, as severe price increases for key building materials, rising regulatory costs, and labor shortages impact their ability to raise production. This has dampened new home sales and quickened home-price growth.”
Mark Palim, deputy chief economist at Fannie Mae, said anecdotal reports of builders delaying or turning down orders to clear a growing construction backlog appears to be borne out by the recent housing starts data.
“The month’s increase in single-family starts coincided with a slowdown in single-family permits, which fell 6.3 percent,” Palim said Tuesday. “While this data tends to be noisy on a month-to-month basis, the divergence between starts and permits is consistent with builders struggling to keep up with orders, as is the tick up in homes authorized but not yet started. With lumber prices recently pulling back, we expect some near-term strength in construction. However, June’s starts gain was somewhat smaller than we had anticipated while the fall in permits was greater. Therefore, a modest downward revision to our near-term forecast is likely.”
Homes for sale are still being snatched up quickly throughout the country, but a recent slowdown in bidding wars may signal some buyer fatigue in the housing market. Redfin reported recently that 65% of home offers written by company agents in June faced competition, down from a rate of 72.1% in May and a peak of 74.1% in April. New listings are also up 4% year over year, meaning more properties are hitting the housing market for buyers to bid on.
In 2018-2019, total housing market inventory was in the range between 1.52 million and 1.92 million, and that level of inventory helped to drive real home-price growth in 2019 into negative territory briefly. Existing home sales during those years stayed in the monthly sale range of 4.98 million to 5.61 million homes, according to the National Association of Realtors.
Then the COVID-19 pandemic hit, and after eight months of consecutive gains spanning 2020 and 2021, the consequences of low home inventory finally caught up with the housing market in February 2021.
Conventional mortgage loans composed 74.4% of loan applications in June, while FHA loans composed 14%. RHS/USDA loans composed 1% and VA loans composed 10.6%. The average loan size of new homes increased from $384,323 in May to $392,370 in June.
“Still-low levels of for-sale inventory are also pushing prices higher as competition for available units remains high among prospective buyers,” Kan said. “In addition to price increases, we are also seeing fewer purchase transactions in the lower price tiers as more of these potential buyers are being priced out of the market, further exerting upward pressure on loan balances.”